Sunday, April 27, 2014

it’s been a fairly light week for new data, with just a few reports on housing and a few on manufacturing...one report that could be considered a snapshot of economic conditions nationally was the Monday release of the Chicago Fed National Activity Index (CFNAI) for March, a composite index of 85 different economic metrics grouped into four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories...the CFNAI, constructed to have an average value of zero such that a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend, decreased to +0.20 in March from +0.53 in February, while the February monthly index was revised to +0.53 from an initial estimate of +0.14, and the closely watched three-month moving average of the index increased to zero in March from –0.14 in February, its third consecutive nonpositive value...production-related indicators added +0.21 to the index in March, down from +0.54 in February, as industrial production rose 0.7% after rising 1.2 percent in February, and the increase in manufacturing output was cut from 1.4% to 0.5%...employment indicators added +0.14 to the index, up from +0.07 in February, as initial claims for unemployment comp decreased to 320,900 from 336,900 and non-farm payrolls rose 0.1%...subtracting from the index were the consumption and housing category, which came in at –0.13 in March after a –0.17 subtraction in February, as housing starts increased but building permits decreased, and the sales, orders, and inventories category of the index, which subtracted 0.02 in March after adding 0.08 in February...

March Existing Home Sales Flat; New Home Sales Fall 14.5%

there were the two March reports on home sales early in the week, for both new homes and those previously owned...on Tuesday, the National Association of Realtors (NAR) reported that existing home sales were essentially unchanged from February on a seasonally adjusted basis, with homes selling at a rate 7.5% below last year's pace...354,000 transactions involving single-family homes, townhomes, condominiums and co-ops were completed in March, up from 282,000 in February, which when extrapolated to a seasonally adjusted annual rate works out to a 4.59 million pace in March, down from a 4.60 million rate in February and the 4.62 million annual sales rate registered in January, and also the lowest seasonally adjusted annual rate of home sales in 20 months...adjusted sales rose in both the Northeast and the Midwest while they fell in the South and West, reversing the regional sales changes of February...the median home selling price for all housing types was $198,500, up from $188,300 in February and $184,000 in March of last year, in price data that is not seasonally adjusted…the average sales price was $246,800, up from $236,600 in February and $233,100 a year ago, with the average price in the West at $332,900 nearly double the average $180,000 homes sold for in the Midwest....distressed home sales selling at a discount, such as foreclosures and short sales, fell to 14% of all sales in March from 16% in February and 23% a year earlier...

on Wednesday the Census Bureau released New Home Sales for March, which we'll remind you is the report that typically has the largest margin of error and is subject to the largest revisions of any census construction series....nonetheless, March's report was free of the asterisks typical in Census construction reports that indicate they don't have sufficient data to determine whether new home sales rose or fell for the month or over the preceding year, as they reported estimated seasonally adjusted sales new single-family houses fell 14.5 percent (±12.9%) from the revised February rate and 13.3 percent (±9.9%) below the sales pace of a year earlier, which means that they are 90% confident that home sales in March were between 4.4% and 23.2% lower than last year... the median new home sales price was $290,000; while the average March sales price was $334,200.... based on sketchy reports from field agents, Census estimated that 36,000 homes sold in March, of which 12,000 were completed, 12,000 were being built, and 13,000 weren't yet under construction... seasonally adjusting those estimates and extrapolating them out to an entire year, they figure 384,000 new homes would sell annually, which is how these sales are reported, and which is the metric shown monthly in the FRED graph below of the history of this series...note that the reported March new home sales estimate is the lowest since the dip in July of last year and at 384,000 annualized contrasts markedly with the 1,389,000 per year rate that new homes were selling at in July 2005....also note that you can track the seasonally adjusted annual rate of home sales monthly over the history of this series by dragging your cursor across the face of the interactive version of this graph...

for manufacturing, we had the advance report on durable goods and two regional Fed surveys...the Richmond Fed, reporting on Tuesday for an area that includes the Virginias, Maryland, the Carolinas, and the District of Columbia, reported that the 5th District Manufacturing Composite rose 14 points in April, from a minus 7 to a plus 7, indicating modest growth had resumed after 2 months of contraction, led by a 19 point gain in their index for new orders, while every indicator except order backlog turned positive...then on Thursday, the Kansas City Fed, covering a region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported that Growth in Tenth District Manufacturing Activity Moderated Slightly in April, as their manufacturing composite index slipped to 7, down from 10 in March, on a scale, like all Fed manufacturing indexes, where positive numbers indicate growth...the region's production index fell from 22 to 12, the new orders index fell from 13 to 9, while the employment index rose from 0 to 3 and the workweek index rose from 3 to 6...

New Orders for Durable Goods Up 2.6% in March; Unfilled Orders at a Record High

also on Thursday, the Census Bureau released the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) which like all "advance" reports, is based on preliminary data and which in this case will be revised as soon as next week when the "Full Report" on factory orders is released, which will also report on the same data for non-durable goods...nonetheless, it's this advance report that's widely watched despite its margin of error, mostly for the first look at new orders, but also for data on capital goods, an indicator that companies are investing in new equipment...in March, new orders for durable goods, which are manufactured items generally expected to last more than 3 years, increased by a seasonally adjusted $6.0 billion to $234.8 billion, 2.6% higher than February's level, which itself was revised from a 2.2% gain to 2.1% as January orders were revised up 0.1%...as is usually the case where there's a strong increase, volatile orders for transportation equipment were a major factor, as they rose $2.8 billion or 4.0% to $74.1 billion in March, which in turn was boosted by an 8.6% increase in orders for non-defense aircraft, as Boeing reported 163 new aircraft orders, compared to 74 in February...but excluding this sector, new orders still rose 2.0% in March...volatile orders for defense capital goods were also up by 21.6%, from $7,653 million in February to $9,308 million in March, and excluding defense new orders were up 1.8%...

except for defense aircraft, new orders for durable goods were up in every category in March...new orders for non-defense capital goods increased by $5.4 billion or 7.1% to $80.5 billion; excluding aircraft from that, orders for so called core capital goods, which are capital goods used in the production of goods or services, were up 2.2% to $69,063 million...other leaders included orders for electrical equipment, appliances and components, which rose 3.5% to $10,555 million, orders for computers and electronic products, which rose 5.7% to $22,433 million, and new orders for communication equipment, which rose 7.9% to $4,642 million.....the picture of our FRED bar graph below, which can also be viewed as an interactive with the data displayed, shows the monthly percentage change for total new orders for durable goods in red, the change in new orders for capital goods excluding defense in green, and the percentage change in new orders for core capital goods, which takes out the obviously volatile aircraft orders, in blue for each month since the beginning of 2012…

seasonally adjusted shipments of durable goods in March, which will be included in 1st quarter GDP as either private or government investment, personal consumption, or exports, also rose for a second consecutive month, increasing $2.5 billion or 1.1% to $236.6 billion, after a 1.0% increase in February...transportation equipment, also up two consecutive months, saw a $1.0 billion or 1.5% increase to $70.0 billion on a 5.2% increase in shipments of commercial aircraft; excluding transportation, shipments rose 0.9% to $166.5 billion...there was again strength across the board as no durable goods category saw shipments fall in March; shipments of non-defense capital goods rose 1.7% to $76,167 million, shipments of machinery were up 1.3% to $35,628 million, shipments of computers and electronics were up 1.6% to $28,981 million and shipments of electrical equipment and appliances rose 1.0% to $10,255 million...year to date, shipments of durable goods are running 3.2% ahead of last year, with only computers, communication equipment, and defense capital goods showing declines from a year earlier...

seasonally adjusted inventories of durable goods, which also add to GDP, were up by $1.9 billion or 0.5% to a new record at $394.1 billion.... transportation equipment inventories were again leading the growth, up $0.9 billion or 0.7% to $126.0 billion, but unlike new orders and shipments, it was inventories of motor vehicles and parts, up 1.1% to $26,480 million, that made the difference here...except for defense aircraft and parts, inventories were also up across the board, with every sector adding to stockpiles...but since inventories represent durable goods manufactured but not shipped and likely not sold, excessive inventories would eventually lead to a curtailment of production; with that in mind, the year over year increases of 14.8% in non-defense aircraft and parts inventories and the 12.1% increase in inventories of computers and related products might be problematic...

finally, we would suggest that unfilled orders for manufactured durable goods are a better measure of industry conditions than the widely watched new orders, which only represent one month's typically volatile activity...in March, unfilled orders, which have increased 13 out of the last 14 months, rose again by $6.1 billion or 0.6% to a new record at $1,068.2 billion...unsurprisingly, the order book for commercial aircraft, which rose 0.8% in March, was the largest at $496,756 million, the equivalent of a 41.4 month backlog at the current shipment rate...but unfilled orders also rose for most categories except fabricated metal products, which fell 0.7% to $84,890 million, motor vehicles and parts, which were off 0.5% to $16,243 million and defense capital goods, which slipped 0.2% to $155,975 million...categories of durable goods seeing the largest increases in their order books were communications equipment, where unfilled orders rose 2.2% in March to $37,458 million, primary metals, where unfilled orders rose 1.3% in March to $36,998 million, and computers and electronic products, where the order book increased by 1.0% in March to $139,246 million...on a year over year basis, unfilled orders for durable goods have increased by 7.3%, with unfilled orders for non-defense capital goods up 13.0% to $648,754 million, led by the 14.9% increase in unfilled orders for commercial aircraft...the order book for core capital goods was 9.3% higher than a year earlier in March, while unfilled orders for communications gear led the increase, 19.5% higher than the same month last year....

a way to check on the health of this manufacturing sector is to compare inventories of durable goods to the level of their shipments or unfilled orders over time, which allows us to see if inventories are appropriate for the amount of orders coming in and goods being shipped out...that’s what our FRED graph below attempts to do; the red graph is a simple metric direct from FRED, showing the ratio of inventories to shipments of durable goods; that’s an indication of how long inventory stockpiles will last at the current sales pace, and it fell to 1.67 months in March from 1.68 months in October…the blue graph below is a similar ratio of unfilled orders to inventories; it is created by dividing seasonally adjusted Unfilled Orders for Durable Goods Industries by Total Inventories for Durable Goods Industries, with both expressed as monthly dollar amounts; what this shows is that in the early part of last decade, the dollar value of unfilled orders was less than twice that of inventories, and gradually grew to three times inventories heading into the recession, when both metrics shrunk…over the last year, that part of the graph we’re interested in, it shows that unfilled orders have been generally growing faster than inventories, as the ratio unfilled orders to inventories was unchanged at 2.71 in March…

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, April 20, 2014

among economic releases of this past week were those for March retail sales and consumer prices, which we’ll look at in detail, and the March Report on New Residential Construction (pdf) from the Census Bureau, which gives us somewhat sketchy data on new housing permits, housing starts, and housing completions, but which is nonetheless widely watched as if it's close to accurate...in March, permits issued for new housing were estimated at a seasonally adjusted annual rate of 990,000, 2.4% less than the February annualized rate, with a reasonable margin of error of ±1.0%, which was also 11.2 percent (±1.1%) above the estimate of Last March...an estimated 83,000 new housing units were started in March, which would work out to a seasonally adjusted annual rate of 946,000 housing starts, which is "2.8 percent (±14.7%)* above the revised February estimate and 6.0 percent (±15.5%)*" above the rate of a year earlier...the asterisks, of course, tell us that Census is uncertain whether there was an increase or decrease in new housing starts for the month or for the year because they've just got a small sampling of data, and that there's a 10% chance that housing starts in March either rose more than 17.5% or fell more than 11.9% for the month, and may be up more than 21.5% or down more than 9.5% for the year...there is similar uncertainty in their estimates on March housing completions, which were reportedly 0.2%(±13.2%)* below February and 7.7 percent (±14.3%)* above the home completion rate of a year ago..

other releases this week included Manufacturing & Trade Inventories & Sales for February from the Census, which is typically covered in the financial press as "business inventories"; this report estimated that total trade sales and manufacturers’ shipments for the month were at a seasonally adjusted $1,311.8 billion, up 0.8 percent (±0.2%) from January, which was 1.8 percent (±0.5%) more than a year earlier, while seasonally adjusted manufacturers’ and trade inventories were at $1,715.6 billion at the end of February, up 0.4 percent (±0.1%) over the month and 4.2 percent (±0.5%) higher than a year earlier...in the manufacturing sector, we saw the first two regional Fed surveys for April and industrial production for March; the April Empire State Manufacturing Survey from the New York Fed, covering New York and part of New Jersey, reported their general business conditions index fell from 5.6 to 1.3, with the new orders index at minus 2.8, on a scale where positive numbers indicate growth... the Philadelphia Fed's Business Outlook Survey for April (pdf), covering most of Pennsylvania, southern New Jersey, and Delaware, saw their most inclusive diffusion index rise from a reading of 9.0 in March to 16.6 in February, the highest reading in 7 months...

Retail Sales Rise 1.1% in March, Up Net 0.1% for First Quarter

retail sales appear to have rebounded from the winter slowdown as the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales for the month were at $433.9 billion, which was an increase of 1.1 percent (±0.5%) from revised February sales of $429.0 billion, and 3.8% (±0.7%) above sales in March of last year....February sales were originally reported at $427.2 billion, and the February increase from January was revised from 0.3% (±0.5%)* to an increase of 0.7% (±0.2%), while January sales were again revised down from $426.1 billion to $425.9 billion...before seasonal adjustments, the estimated sales for March were at $438,675 million, up from $386,277 million in February...even with stronger March sales and the revision to February, total retail sales for the first quarter were only 0.1% above the seasonally adjusted retail sales in the 4th quarter, and 2.5% ahead of the first quarter of 2013...while we'll review the March data as presented in this advance estimate, understand that it's from a fairly small sampling and subject to revision, just as February's sales were revised up 0.4% and January's were revised down 0.3%...

as usual, we'll begin by including below a picture of the table of monthly and yearly percentage changes in sales by business typefrom the Census pdf...notice there are three double columns in the table; the first double column shows us the percentage change in sales for each kind of business from the February revised figure to this March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column set below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2013 revised" and the February to February percentage change as revised in the 2nd column of the pair; and the third double column shows the percentage change of all 3 months of this year's sales (January, February and March) from the preceding three months (October thru December) and from the same three months of a year ago....with estimates for those 3 months now in place, we'll be able to use them to estimate the contribution of this report to 1st quarter GDP...

as should be obvious from the above table, the 1.1% gain in March sales was partially driven by a 3.4% increase to $76,933 million in sales at auto and other vehicle dealers, which contributed to the 3.1% increase in overall automotive sales to $84,131 million...without those motor vehicle and part sales, other retail sales were up 0.7% to $349,776 in March...business types seeing the largest percentage seasonally adjusted increases in March included general merchandise stores, where sales rose 1.9% to $55,845 million, building material and garden supply stores, where sales rose 1.8% to $26,609 million, non-store or online retailers, where March sales rose 1.7% to $39,549 million, restaurants and bars, where sales rose 1.1% to $47,330 million, furniture stores, where sales rose 1.0% to $8,457 million, and clothing stores, where sales rose 1.0% to $21,079 million...business types that saw seasonally adjusted sales decrease in March included electronics & appliance stores, where sales fell 1.6% to $8,226 million, gasoline stations, where sales fell 1.3% to $45,001 million, and miscellaneous store retailers, where sales also fell 1.3% to $39,549 million..

looking at the revisions to February in the table above and comparing them to the table from the advance report for February last month, we see a major driver of the revision from 0.3% growth in sales to 0.7% growth was the revision to sales at auto and other vehicle dealers, which were originally reported increasing by 0.3% and are now shown to be up 2.7%; indeed, without the revision to automotive sales, February sales would have been up 0.3% just as originally reported....however, within sales by business type, there were other major revisions as well....the sales gain at furniture stores was revised from a 0.4% increase in sales to a gain of 0.9%; sales at electronics and appliances, originally said to be down 0.2%, are now seen increasing by 0.4%; the sales increase by nonstore (online) retailers was revised from 1.2% to 1.6%, and the increase in sales at restaurants and bars has been revised from 0.3 to 0.8%…in major downward revisions, February sales at building material and garden supply stores, which had been seen growing 0.3% in the advance report, are now seen to have contracted by 0.6%, while the increase in sales at drug stores was lowered from 1.2 to 0.6%...

nonetheless, even with the significant upward revision to February sales, and March sales increases that were the largest monthly increase in retail sales since September of 2012, the total seasonally adjusted sales for the 1st quarter of this year were only 0.1% above the seasonally adjusted sales of the 4th quarter of last year, which is not looking good for the contributions from durable goods and nondurable goods to 1st quarter GDP...however, before we can estimate how retail sales might impact GDP, we need to adjust them for inflation, as all real GDP data is so adjusted...and this week we can easily do that, since the consumer price data was released the day after the retail sales report...

the seasonally adjusted food index rose 0.4% in March after rising 0.4% in February and was thus 1.7% higher than last March....prices for food away from home rose 0.3% as meals at full service restaurants were 0.2% higher, while prices at fast food restaurants rose 0.3% and prices for other food away from home rose 0.5%....meanwhile, the price index for food at home rose 0.5% with major food groups impacted by drought increasing notably...prices in the meats, poultry, fish, and eggs group rose 1.2% for the month as egg prices rose 4.4% and beef prices rose 1.9%, while prices for fish and seafood fell 0.7% from February; for the year, eggs were 9.9% higher, while beef prices were up 7.4% from a year earlier....prices for dairy products were up 1.0% in March as milk prices rose 1.8%, cheese prices rose 2.1%, while ice cream was 0.2% lower; milk is now up 4.8% year over year....prices for the fruits and vegetable group were 0.9% higher in March as citrus fruits jumped 7.5%, canned fruits and vegetables rose 1.6%, and apples were 1.2% higher while tomato prices fell 4.3%; for the year ending March, citrus prices were 17.0% higher while lettuce prices remained 16.9% below those of a year earlier....prices for cereal and bakery goods were 0.2% higher in March and just 0.4% above prices of a year earlier, as rice rose 1.2%, breakfast cereal prices rose 0.7%, while bread prices fell 0.9% and frozen pastry prices fell 1.8%; the largest one year price change in the group was a 2.1% increase in the price of rice...meanwhile, prices in the beverage group fell 0.2% as non-carbonated juices fell 1.0% while coffee prices rose 0.9%, while over the year beverage prices fell 1.8% with coffee prices 6.0% lower...lastly, prices for other foods at home fell 0.1% as snacks, spices, seasonings and sauces all fell 0.4% while soups and sugar both rose 0.7%...

the seasonally adjusted energy index fell 0.1% in March after falling 0.5% in February and is now unchanged year to date...the price drop was entirely due to seasonal adjustments, as unadjusted data showed energy prices up a normal 3.5% in March...a 2.0% drop in the energy commodity index was the major factor in the seasonally adjusted price drop, as gasoline prices fell 1.7% and are now 4.7% lower than the same time last year, while fuel oil prices fell 2.9% after rising 3.7% in January and 4.1% in February and are now 2.9% higher than a year ago...in addition, other fuels, which included propane, kerosene and firewood, were off 13.7% in March but are still 18.2% higher than a year ago...meanwhile, the energy services index rose 2.6% as electricity prices rose 1.1% and utility gas rose 7.5% and is now 16.4% more expensive than a year ago...

excluding food and energy, most of the seasonally adjusted price changes to core CPI components were modest in March, with an increase in shelter costs largely responsible for the rise in the core Index ....the index for shelter, which is almost 32% of the CPI, rose 0.3%, with rent of shelter rising 0.3%, as rent and owner's equivalent rent were both up 0.3%, while prices for lodging away from home rose 1.5%...prices for apparel, which had been down 0.3% in both January and February, rose 0.3% in March as footwear prices rose 0.6% while a 4.5% price increase in women's outerwear prices was partially offset by a 3.6% decrease in prices for dresses...in addition, the aggregate index for medical care was up 0.2% as medical commodities fell 0.3% on lower prescription drug prices, while medical services were up 0.3% on 0.8% higher hospital charges and the cost of health insurance fell 0.2%….in addition, the transportation commodity index excluding fuel rose 0.1% as used car prices rose 0.4% and new car prices were unchanged, while the transportation services index rose 0.2% on 4.0% higher car rentals and 0.5 higher airfares, partially offset by 0.3% lower vehicle repair charges...meanwhile, the recreation index was off 0.1% as recreation commodities fell 0.3% on a 1.8% decrease in TV prices and a 1.4% decrease in prices for audio equipment, which were partially offset by a 1.1% increase in prices for photographic equipment and supplies, while recreation services rose 0.1% on a 0.4% increase in prices for cable and satellite television and radio service which was partially offset by a 0.3% decrease in club dues and fees for participant sports and exercises...finally, the aggregate education and communication index rose 0.2% even though education and communication commodities fell 0.2% on 0.4% cheaper textbooks and a 0.3% decline in personal computers and peripheral equipment because education and communication services rose 0.2% on 0.7% higher child care and nursery school prices and 0.4% higher college tuition.... on a year over year basis, four line items among CPI components other than food and energy showed price changes greater than 10%; prices for women's outerwear has risen by 10.5%; video disc and similar media services have declined by 10.4% as have prices for photographic equipment, and televisions are 12.7% cheaper than they were a year earlier...

our new FRED graph below shows the overall change in each of the major component indexes of the CPI since January 2000, as we've reset all indexes to 100 as of that month for an apples to apples comparison of the price changes in each...in blue, we have the relative track of the price index for food and beverages; in bright green, we now have the reset price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; in red, we have the price changes for apparel, the only index to show a net price decline over the decade; while the relative change in the price index for medical care in violet has obviously shown the most increase over the period…next, the transportation price index is in orange, and shows the impact of volatile fuel prices on the cost of transportation, while the price change for education and communication over the period is tracked in brown, and in dark green, is the relative strength of the index for recreation prices...finally', we’ve included the track of the overall CPI-U in black, which tends to track close to the large housing component, which makes up 41.5% of the total index…this graph has been changed to an interactive, wherein you can track the monthly changes in all of these relative indexes by dragging your cursor across the graph; due to a bug in FRED, March data will not display in some browsers unless you push the right bottom slider all the way to the right…

next, we'll look at how retail sales, in combination with adjustments from the detailed prices in the CPI, might impact the change in 1st quarter GDP....you'll recall that roughly 68% of GDP is personal consumption expenditures (PCE); even though most of that is spending for services, spending for durable and non-durable goods, such as would be included in the retail sales report, still amounts to a third of PCE, or roughly 23% of GDP...but retail sales as reported are not adjusted for price changes, whereas the change in real GDP is, as real GDP, despite its denomination in dollars, is really a measure of the growth rate of our national product in UNITS of goods and services produced...what the BEA does when computing GDP is adjust every dollar denominated component with an inflation gauge in order to arrive at the quarter over quarter change in units of production...in the case of goods sold at retail, the BEA computes a PCE price index for both durable and non-durable goods using many of the components of the CPI (here's a stub of their excel file showing how they do that)...what we'll do is a quick and dirty approximation of how price changes effect retail components, and since all of our data is already seasonally adjusted and to one just decimal place anyhow, we'll keep our estimate equally simple...

we'll start with the largest component of retail sales, which is motor vehicle and parts dealers, which according to the retail table above, fell 0.5% in the first quarter; we'll adjust that with the price index for "transportation commodities less motor fuel" which includes weighted prices for new and used vehicles, and tires and parts, and which was down 0.3% over the past three months; using our crude math, we adjust the 0.5% dollar value change in motor vehicle and parts sales with the cumulative 0.3% price decrease to find that real unit sales of motor vehicles and parts fell by just 0.2%...next we see that furniture store sales in dollars were down 2.4%; we adjust that with the 0.1% price increase for "household furnishings and supplies" over three months and find that unit sales of furniture were down 2.5%; next, we have sales at electronics and appliance stores down 1.7% for the quarter which we adjust with the weighted price indexes for appliances and for video and audio products, and find that real unit sales at electronics and appliance stores were down just 0.7%...next, dollar value sales at building material and garden supply stores were up 1.6% for the quarter; when we adjust that with the price index for "tools, hardware, outdoor equipment and supplies", which was up 0.5% over 3 months, we find that unit sales of building material and garden supplies were up 1.1% over that period...next on the table we see sales at food & beverage stores increased 1.1% for the quarter; since the food at home index was up 1.1% over three months, actual food store product sales are unchanged...next, sales at health & personal care stores, which are more commonly referred to as drug stores, were up 0.3% for the quarter; adjusting those sales with the price index for medical care commodities which was up 0.8 over the quarter indicates that unit sales at drug stores really fell 0.5%...next are sales at gas stations, which were up 0.8% in dollars in the 1st quarter, while the quarterly price changes for all types of gasoline were down 4.4% (without monthly compounding), vehicle parts and equipment were down 0.4% and vehicle maintenance and repair were up 0.4%, it would appear that real gas station sales were up approximately 1.2% in the quarter...next, clothing store sales were down 1.2%, and adjusting them with the apparel index which was down 0.3% leaves us real sales of clothing still down 0.9%...sales at sporting goods, hobby, book & music stores were down 4.7% in the 4th quarter; we'll adjust them with the recreational commodity price index and find that real sales of sporting goods, books & music were still down 4.3%, while sales at general merchandising stores were up 0.1% in the quarter, and adjusting them with the quarterly change in the price change for retail commodities less food, energy and used cars and trucks indicates real sales at general merchandising stores rose 0.3% for the quarter; we also adjust the nominal 2.2% decrease in sales at miscellaneous stores with the same index and call their real sales down 2.0% in the 1st quarter...meanwhile, sales at non-store retailers were up 1.3% for the quarter; we've previously decided to adjust those mostly online sales with a weighted combination of software and book prices, consumer electronics prices, and the apparel price index which would result a 1.8% increase in real online sales ..lastly, sales at bars and restaurants were down 0.2% during the 1st quarter; adjusting that for 0.7% rise in prices for food away from home means real restaurant sales fell 0.9%...

it's pretty clear without even doing the math that sales in most retail sectors were down in real inflation adjusted terms in the 1st quarter, with automotive, the largest at 19% of retail, down 0.2%...so, multiplying each real change by the percentage of total retail for that sector (and eliminating gas stations because they have been the margin of error in each previous time we've calculated this), we have the following, starting with automotive: (-.038) - .050 - .014 + .066 + 0 - .030 - .045 - .086 + .039 -.040 + .162 - .099 equals -.135%, which assuming we've done our math right suggests that there was no real growth in personal consumption expenditures of goods in the first quarter, and that it may even be negative by a bit over 0.1%, and hence they’d subtract .031% from 1st quarter GDP....that would be in marked contrast to the 4th quarter, when durable goods consumption grew at a 2.8% annual rate and added .21% the the change in GDP and non-durable consumption grew at a 2.9% rate and added .45% to GDP...

March Industrial Production Up 0.7%; February Increase Revised to 1.2%

the monthly G17 from the Fed, on Industrial production and Capacity Utilization, reports industrial production by industry and by market group as index values and percentage changes from a month ago and quarterly at an annual rate, and capacity utilization as a percentage of plant and equipment in use during the month...in March, seasonally adjusted industrial production increased by 0.7% as the industrial production index, which is based on 2007 production equal to 100, rose to 103.2, while February's industrial production index was revised from 102.0 to 102.5, thus revised to 1.2% above the January level...the increase for the first quarter was thus 4.4% at an annual rate, as components of this report will show up in the end of month 1st quarter GDP release reported similarly...the output of manufacturing, which accounts for three-fourths of total industrial production, rose 0.5% as the manufacturing index rose from a revised 98.2 to 98.7, and February's increase was marked up to 1.4% from the originally reported 0.9%...however, due to the 0.9% retreat in January, 1st quarter manufacturing grew at just a 1.7% annual rate...one driver of the higher industrial production index in the quarter was the seasonally adjusted output of utilities, which rose at a 17.9% rate, as the March utility index rose another 1.0% to 108.0 on yet another colder than normal month in the populated East....since utility usage also grew at a 19.5% annual rate in the 4th quarter, expect that we'll give most of that growth back when the weather normalizes....but the mining index also rose again, from 123.5 in February to 125.3 in March, a 1.5% increase following the 0.8% increase in January and the 0.9% increase in February...on a quarterly basis mining, which includes gas and oil production, grew at a 9.5% annualized rate over the 1st quarter...

in addition to the breakdown of industrial production into those three industry groups, this G-17 release from Fed also reports on industrial production by market group...among final products and nonindustrial supplies, which grew by 0.6 in March, seasonally adjusted production of consumer goods rose 0.7% after rising 1.3% in February...of those, production of durable goods grew by 0.2% after a 2.9% February increase as production of automotive products fell 0.4% and production of home electronics fell 0.3% while output of appliances, furniture, carpeting mostly reversed the 2.7% February decline with March growth of 2.0%...on a quarterly basis, the production of durable goods fell at a 2.2% annual rate as automotive output fell at a 3.6% rate and output of appliances, furniture, carpeting fell at a 5.1% rate...meanwhile, production of non-durable goods rose 0.9% for the 2nd month in a row in March as output of consumer energy products rose 2.5% and non-energy non durables rose 0.3%...within the latter, clothing output rose 3.3%, output of chemical products rose 1.0%, paper products production rose 0.2%, while food and tobacco production fell 0.2%...for the quarter, consumer non-durable production grew at a 6.5% annual rate on a 14.5% growth rate of energy products and an 8.8% growth rate for chemical products...

seasonally adjusted production of business equipment rose 0.5% in March after rising a revised 2.0% in February as production of information processing equipment rose 1.2% and production of transit equipment rose 1.0% while production of industrial equipment was unchanged...for the 1st quarter, output of business equipment rose at a 4.2% annual rate, as production of industrial equipment rose at a 7.9% rate for the quarter while transit equipment fell at a 2.5% rate...also, production of defense and space equipment rose by 0.7% in March and grew at a 1.4 annual rate in the 1st quarter...in addition, production of supplies for use in construction rose by 0.2% in March and at a 1.2% annual rate in the first quarter, while production of business supplies rose by 0.6% in March and at a 5.3% rate for the quarter...meanwhile, production of raw and intermediate materials that would input into other production processes rose at a 0.9% rate In March led by a 4.5% one month jump in textiles output, while 1st quarter production of such materials to be processed further in the industrial sector grew at an annual rate of 4.7%...

with industrial production up, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, from 78.8% in February to 79.2% in March...76.7% of our manufacturing capacity was in use during March, up from 76.5% in February but not much changed from the manufacturing utilization rate of 76.4% in March of last year...the operating rate for NAICS classified durable goods manufacturers was at 76.3%, up from 76.2%, let by an 83.3% rate for manufactures of electrical equipment, appliances, and components, while the March operating rate for NAICS classified manufacturers of non-durables was at 78.5%, up from 78.1% in February, with the oil and coal products industry operating at 85.2% of capacity...meanwhile, capacity utilization by the 'mining' industry rose from 88.2% to 89.1%, which given their higher production, suggests that oil and gas rig counts probably rose during the month; while the operating rate for utilities fell from 83.5% to 83.3%...over the last year, manufacturers added 2.0% to their plant capacity, the mining industry saw capacity grow by 4.7%, and utilities expanded their plant base by 0.6%....

our FRED graph for this report below shows the seasonally adjusted industrial production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0… as an interactive graph, you can track the monthly changes in these indexes by dragging your cursor across the graph…also shown below is the track of capacity utilization for total industry since 2007 in pink; note that it’s a percentage, whereas the other metrics on the same graph are index values generated by the Fed...

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, April 13, 2014

it's been a fairly light week for economic data, but we did have the release of the Mortgage Monitor for February from Black Knight Financial Services (aka LPS Data & Analytics), the nearly all graphics report on the mortgage crisis which we've been reviewing for years, so after we take a quick look at the data from the regular monthly government releases, we'll take a look at a handful of graphs and pictures from that report and see what they tell us about homeowners with mortgage trouble...

February Consumer Credit Grows at a 6.4% Annual Rate on Student Loans

the first release we saw last week was the G.19 Release on Consumer Credit for February from the Fed, which you might recall we tracked monthly a few years ago when student debt issued by the federal government was growing at a 50% annual rate...in February, total seasonally adjusted consumer credit increased at a $16.49 billion annual rate to $3.13 trillion, which would work out to a 6.4% growth rate over a year...however, the revolving portion of that, which would be like credit cards, decreased by $2.4 billion, a 3.4% annual rate, to $854.2 billion, while non-revolving credit, which includes loans for autos, yachts and college but not real estate, rose by $18.9 billion to $2,275.3, an annual rate of 10.1%....January's seasonally adjusted credit increase was revised to $13.80 billion instead of the previously reported $13.70 billion, with a $0.2 billion decrease in revolving credit and a $14.0 billion increase in non-revolving credit…the Zero Hedge bar graph below shows the seasonally adjusted monthly change in non-revolving credit outstanding in red and revolving credit monthly in blue since the beginning of 2011, with negative changes pointing down…the black line sums the two to track the headline change in credit that this release reports on...

the unadjusted data show that total credit outstanding has actually fallen since December with revolving credit contracting sharply, as one might expect during the post holiday winter months...the abbreviated table below, excerpted from the second table in the report, shows the actual level of credit outstanding in billions of dollars by type and by holder at year end for each year from 2009 to 2013, and then also at the end of January and February…note that revolving credit outstanding in February fell $18.5 billion in these preliminary figures, after falling $21.1 billion in January, as consumers paid for their holiday credit card purchases, and that revolving credit, which is mostly car and student loans, jumped $33.0 billion in January but rose just $3.8 in February…in the revolving credit section, we can also see the rapid expansion of student debt from $223.1 billion in 2009 to $764.0 billion as of February in non-revolving consumer debt originating with the Federal government, which are student loans originated by the Department of Education…the pdf of this report puts total student debt from all sources, including private student loans without government guarantees, at $1,225.6 billion at year end, with more recent data on the aggregate unavailable..also note thatwere it not for the student loans, non-revolving credit would also have been negative year to date...

this release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'others', which include retirements and death...in February, seasonally adjusted new hires totaled 4,587,000, which was up slightly from 4,516,000 million hired or rehired in January, while the hiring rate as a percentage of all employed was unchanged at 3.3%, same as it was for the past 5 months.....seasonally adjusted hiring increases were strongest in accommodation and food services, where hiring rose by 23,000 workers to 695,000, while hiring in health care and social assistance fell by 35,000 to 440,000....total separations, on the other hand, were down by 35,000, from 4,419,000 in January to 4,384,000 in February, while the separations rate as a percentage of total employment was unchanged at 3.2%...thus hires minus separations would work out to an increase of 203,000 payroll jobs, a bit more than the revised 197,000 jobs reported for February in last weeks jobs report...

February Wholesale Sales Rise 0.7%; Inventories Up 0.5%

another release we saw at midweek was on Wholesale Trade, Sales and Inventories for February from the Census Bureau, which reported that seasonally adjusted sales of wholesale merchants rose 0.7% (+/-0.4%) to $436.1 billion from the revised January estimate of $433.1 billion and were up 3.1% (+/-1.6%) from a year earlier...the January preliminary sales estimate was revised downward $0.1 billion but was still 1.8% lower than December, suggesting a weaker 1st quarter for wholesalers...sales of durable goods were up 0.1% (+/-0.5%) over January and were up 2.9 percent (+/-1.1%) from February a year ago as wholesale metal sales rose 1.9% while lumber wholesale sales fell 2.9% and computer equipment wholesale sales fell 2.7%...sales of nondurable goods were up 1.2% (+/-0.5%) from January and 3.3% (+/-2.6%) higher than a year earlier as sales of petroleum and petroleum products were up 4.0% while sales of farm products fell 4.6%...meanwhile, seasonally adjusted wholesale inventories were valued at $518.3 billion at the end of February, 0.5% (+/-0.4%) higher than the revised January level and 4.7% (+/-0.7%) above last February's level, while January's preliminary estimate was revised upward $0.3 billion or 0.1%...wholesale durable goods inventories were up 0.7% (+/-0.4%) in February and up 5.9 percent (+/-1.1%) from a year ago, with inventories of computer equipment up 2.2% and wholesale inventories of professional and commercial equipment and supplies up 1.4%...inventories of nondurable goods were up 0.1% (+/-0.5%) from January and up 2.9% (+/-1.2%) from last February, as inventories of farm products were up 2.7% while inventories of petroleum were down 2.6%...finally, the closely watched inventory to sales ratio of merchant wholesalers was unchanged from January at 1.19%, while up slightly from the 1.17% ratio of last February...

March Producer Prices Rise 0.5% and are 1.4% Above a Year Ago

on Friday, the Bureau of Labor Statistics released the composite Producer Price Index for March, which in addition to reporting on selling prices received by producers for finished, intermediate and raw goods, it now includes prices for services, and construction sold for personal consumption, capital investment, government purchases, and export....the seasonally adjusted headline producer price index for final demand rose by 0.5% in March after falling 0.1% in February and is now up 0.6% for 2014 and 1.4% higher than a year ago, the greatest year over year increase in 7 months...the index for final demand for services rose 0.7% after falling 0.3% in February, while the index for final demand goods was unchanged after rising 0.4% the previous month...core producer prices for final demand goods, which exclude producer prices for food and energy, rose 0.1% in March, as finished foods rose 1.1% while final demand energy fell 1.2%…major factors in the increase in wholesale food prices were a 7.2% increase in prices for pork and a 4.6% increase in grain prices, while a 15.7% decline in the price of LP gas and a 7.0% decline in No 2 diesel fuel weighed on the final demand energy index...in finished goods other than energy, only textile house furnishings, which fell 5.2% in price, and Industrial chemicals, which fell by 2.0%, saw price changes greater than 1.0%...meanwhile, of the 0.7% jump in prices for final demand services, roughly three fifths of it was due to a 1.4% increase in margins for final demand trade services, a measurement of changes in margins received by wholesalers and retailers; of that, the largest jumps were an 8.1% jump in margins for flooring and floor coverings retailing and a 4.7% increase in margins for chemicals and related products wholesaling...

Foreclosure Starts, Mortgage Delinquencies, and New Mortgages All at New Lows in February

lastly, as we mentioned in opening, we'll now take a look at the Mortgage Monitor for February from LPS, aka Black Knight Financial Services, which we usually follow for its thorough graphics presentation on mortgage delinquencies and foreclosures, without spending much time on the other areas that this 30 plus page report covers, which includes mortgage modifications, home sales and prices, homebuyer credit ratings and a host of other special mortgage related topics as they come up....but this week we'll start by with the widely cited news from this month's Mortgage Monitor that new mortgage originations were at their lowest since their records began, at least a 14 year span that includes the worst of the housing bust....BKFS assures its clientele that home sales remain stable because cash sales now account for almost half of all transactions, and complains the reason for the decline in new mortgages is that credit standards have remained tight, so borrowers with lower credit scores have difficulty getting a mortgage...whatever the reason, it looks like individuals who need a mortgage are being squeezed out and replaced by investors and corporations with cash...the first graph below, from page 4 of the pdf presentation, shows that this decline in new mortgages is a fairly recent phenomena that seems to have begun last summer when the threat of a Fed pullback caused interest rates to spike…as recently as last spring, new mortgages were being issued at a 800,000 a month rate, but as of this report new mortgages have collapsed to under 300,000 a month…there may be some seasonality in play here, as this data is not seasonal adjusted, but it’s clear that last February still saw an elevated level of new mortgages…also note by the color coding that the lion’s share of mortgages (FHA/GNMA. VA, & GSEs), are government backed, with “other mortgages” in orange and TBD (To Be Determined) approvals in light blue accounting for just a sliver…

the graph below, from page 22 of the Mortgage Monitor pdf, shows the percentage of active home loans that were delinquent monthly since 1995 in red and in green the percentage of mortgages that had been in the foreclosure process monthly over the same period…obviously, the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 2.22% in February is now just over half of the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice we're still 5 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.97% of all mortgage outstanding in February, we’re down nearly 43% from the 10.57% of mortgages that were delinquent but not in foreclosure in January of 2010, but still well above the December 2005 delinquency percentage of 4.27% noted on the graph...the seasonality of mortgage delinquencies is also apparent in the track of the red graph, wherein they usually begin to increase at the begiinning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping...in the face of higher heating bills this winter, we're surprised that decline in delinquencies has remained pronounced as it is...

the next graphic is a map from page 23 of the pdf which shows the percentage of homeowners who are either seriously delinquent or in foreclosure in each county in the US; those counties in the darkest red, including most counties in New York, New Jersey, Florida and Maine, have over 10% of their homeowners with a mortgage that is still in serious trouble; on the other hand, those in the darkest green, including many in N Dakota and other resource boom area,s approach zero percent of their homeowners either more than 90 days late or in foreclosure…

the next graph below, from page 17 of the mortgage monitor pdf, gives us a count of the number of foreclosures initiated each month by the number of months that the homeowner was delinquent when the foreclosure was first initiated, with the number foreclosed in each given delinquency bracket on the left margin...in dark blue, we have the number of homes that were 6 months overdue when foreclosure was started, in orange we have the number 5 months delinquent when foreclosure was initiated, in teal blue, foreclosure starts in the 4 month bracket, while the 3 month delinquency bracket is in violet and the 2 month delinquents who were foreclosed on are in red...we can see early on in the mortgage crisis many homeowners were having foreclosure proceedings initiated after falling 3 months behind, and now most are delinquent for 6 months or more before foreclosures are started...BKFS wants us to note that there's been a large drop in foreclosure starts primarily in the 2 and 3 month delinquent brackets, which they blame on new rules from the Consumer Financial Protection Bureau...

the last two graphics relate to the lengthening period of time that those are in foreclosure remain mired in the process...the graph below, from page 19 of the pdf, shows the historical pipeline ratio for judicial states, where a court proceeding is necessary to complete a foreclosure, in blue, and the same ratio in non-judicial states, where such a proceeding isn't necessary for the banks to have the the home seized, in red....as the graphic indicates, the pipeline ratio is computed by adding those homes that are seriously delinquent to those already in foreclosure and dividing that by the average number of completed foreclosures per month over the previous 6 months; what that results in is the average number of months a problem home loan would be in the "foreclosure pipeline" at the current pace of foreclosure in each state before the foreclosure process on all seriously delinquent homes is completed…obviously, early on in the crisis, the process was much longer for judicial states, with their average reaching 118 months and the foreclosure pipeline ratios reaching 50 years for New York and New Jersey, but as we can see on the graph, the difference has closed as judicial states have moved to speed the process...still, the pipeline ratio now averages 51 months, or more than 4 years for judicial states, and 45 months and rising for non-judicial states...the reason for the increase in the foreclosure pipelines recently is not so much delays in court anymore but procrastination on the part of the mortgage servicers and banks, possibly because they've experienced quite a bit of deterioration in the properties they've seized, and would rather have them occupied by delinquent homeowners than ravaged by vandals...as of February, seriously delinquent homeowners have averaged 481 days in their homes since first becoming seriously delinquent, while those in the foreclosure process have been delinquent on their mortgages for an average of 956 days without a foreclosure sale...

in the final plate, from page 20 of the Mortgage Monitor, we have a map showing the average length of time a home in foreclosure has been delinquent for each county in the US, and as the heading indicates, the average nationally is now greater than 2.6 years...in those counties shown in red, properties have remained in the foreclosure pipeline for an average of 1,200 days or more since they first became seriously delinquent on their mortgage...and although the scale indicates that those counties shown in green could have been delinquent as few a zero days, we know that's not precise because homeowners who have never been late in paying on their mortgage would not be in foreclosure..

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

the seasonally adjusted job gains in March were widespread across most sectors, with only manufacturing showing a net reduction of 1,000 jobs, as non-durable manufacturing industries lost 9,000 jobs, 4,600 of which were in food production...the large professional and business services sector added 57,000 jobs in March, exactly half of which were in temporary help services, with computer systems design also seeing the addition of 6,100 jobs...another 34,000 jobs were added in the broad education and health services category, 27,000 of which were in health care and social assistance; of those, 8,500 were in home health care services, while nursing care facilities cut 5,200...in addition, 29,000 jobs opened up in leisure and hospitality with an increase of 30,400 working at food services and drinking places, while 21,300 jobs were added in retail sales with the addition of 9,000 employees at food and beverage stores...meanwhile, 7,100 jobs were added in wholesale trade as durable goods wholesalers added 10,000 with small job losses elsewhere, and 7,900 were added in transportation and warehousing with the addition of 3.300 truck drivers...construction employment rose by another 19,000, 6,000 of which were in residential specialty trades, and the mining and logging sector also added 7,000 jobs, 5,400 of which were in support activities for mining...elsewhere, the information industry added 2,000 jobs, financial activities added 1,000 as gains in real estate offset jobs losses elsewhere, and overall jobs in government sector were unchanged as federal employment fell by 9,000, state employment fell by 2,000, and local governments added 11,000 workers...

the screenshot of our FRED bar graph below shows the seasonally adjusted monthly change in payroll employment in selected sectors since the beginning of 2013, with the scale on the left indicating the increase of payroll jobs in thousands when the colored bar for that sector extends upwards, and the decrease in jobs in thousands in that sector when its bar points downwards…in each monthly grouping of 8 bars, the monthly change in manufacturing employment for that month is indicated in blue, the change in monthly construction employment is in red, the monthly change in retail employment is in dark green, the monthly change in government jobs is in yellow, the change in employment in the large professional and business services sector, which could be anything from a manager to a janitor, is in grey, while the change in jobs in bars and restaurants is in light green, health care jobs are in orange, with private education jobs shown in violet..a 1000 pixel interactive of this graph should be available at the FRED website, where you'll be able to step through the data for each job type by moving your cursor across the graph, or expand the view with the slider on the bottom to take in more months...

other data from the establishment survey indicated that the average workweek for all payroll employees recovered to 34.5 hours in March after falling to 34.3 over January and February while the average workweek for production and nonsupervisory employees similarly recovered to 33.7 hours after previously falling to 33.4 hours....the manufacturing workweek increased by 0.4 hours to 42.0 hours, and factory overtime rose by 0.1 hour to 3.5 hours......the average hourly pay for all workers, however, fell a penny to $24.30, as construction, leisure and hospitality, and education and health service sectors all saw their pay drop by 4 cents an hour or more while the data showed utility workers saw a drop of 41 cents an hour in their pay...excluding management, average pay for nonsupervisory workers was down 2 cents to $20.47, with hourly pay cuts for line employees in those sectors somewhat more modest...

Labor Force Participation up 0.2% in March on 476K Jump in Employed

meanwhile, the returns from the March household survey improved considerably from the weakness we saw in February, as it showed a 476,000 seasonally adjusted increase in those reporting they were employed, while the extrapolated count of the unemployed rose by 27,000...with that corresponding 503,000 increase in the civilian labor force, the labor force participation rate rose 0.2% from 63.0% to 63.2%, and as the working age population rose by 173,000, the employment rate, also known as the employment to population ratio, also rose by 0.1% to 58.9%...thus, the count of those not in the labor force fell by 331,000, it's third consecutive decline after hitting an all time high of 91,808,000 in December... however, with greater participation in the labor force, the unemployment rate remained unchanged at 6.7%, although we should note with the small sampling in this survey, there's a margin of error in the unemployment rate of +/- 0.2%, while the margin of error in the count of the unemployed is +/- 300,000....also note that the unadjusted household data showed a 956,000 increase in those employed, while the count of the unemployed fell 356,000…the screenshot of our FRED graph below shows the track of the two metrics from this survey that we follow since 2000; the labor force participation rate is in red and the employment-population ratio is in blue...it's fairly obvious even without checking the interactive version of this graph that both metrics are off their recent lows...

the other important release of this past week was the report on our International Trade in Goods and Services for February from the Commerce Department, which showed our seasonally adjusted trade deficit jumped $3.0 billion in February to $42.3 billion, while January's trade deficit was also revised upwards from $39.1 billion to $39.0 billion...our seasonally adjusted exports decreased $2.0 billion to $190.4 billion as our exports of goods decreased $2.0 billion to $131.7 billion while our exports of services was nearly unchanged at $58.7 billion, and our imports of goods increased $1.0 billion to $232.7 billion as our imports of good rose $0.2 billion to $193.4 billion, while our imports of services increased $0.8 billion to $39.3 billion; the later was accounted for by an $0.8 billion increase in royalties and license fees, mostly for the rights to broadcast the Winter Olympics...the screenshot of our FRED bar graph below shows the monthly change in exports in blue and the monthly change in imports in red over the past two years, with the net of them resulting in the change in the balance of trade, which is shown in brown...each group of three bars represents one month’s of trade data, with positive changes above the ‘0’ line and negative changes below it; note that when exports (blue) increase in a given month, they add to the trade balance change in brown; and when exports decrease, they subtract from the brown trade balance bar, while the action of imports on the balance is just the reverse, ie, when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…the interactive version of this bar graph at FRED loads with 20 years of trade data, which you can view monthly by moving your cursor across the graph, or use the sliders across the bottom of the graph to adjust the time period viewed...

end use categories of exports that saw seasonally adjusted decreases in February included industrial supplies and materials, which were down by $2,667 million on $1,207 million less exports of non-monetary gold, $851 million less exports of petroleum products other than fuel oil, and a $277 million decline in exports of fuel oil, and also $894 million less exports of capital goods, which was entirely accounted for by the $904 decrease in exports of civilian aircraft; exports which increased in February included consumer goods, which rose $1,187 million on a $471 million increase in exports of pharmaceuticals, $441 million more gem diamond exports, and $365 million more exports of jewelry, and exports of other goods not categorized by end use rose $636 million...exports of automotive vehicles, parts, and engines also rose by $96 million, while exports of foods, feeds, and beverages rose by just $18 billion as small increases in several line items were offset by a $250 million decrease in soybean exports...

end use categories of imports that saw seasonally adjusted increases for the month included vehicles, parts, and engines, which rose by $1,003 million to $25,886 million, consumer goods, which increased by $122 million on a $572 million increase in imports of pharmaceuticals and a $177 million increase in imports of cotton apparel and household goods, which were partially offset by $184 million lower imports of artwork and antiques, $163 million less imports of furniture and similar household goods, and $162 million lower imports of televisions and video equipment, and other goods not categorized by end use, imports of which rose $58 million...on the other hand, our imports of capital goods decreased by $1,157 million on $596 million less computer imports, $331 less imports of computer accessories, and $204 lower imports of telecommunications equipment, and our imports of industrial supplies were $307 million lower on an $845 million decrease in imports of crude oil, which more than offset increases of $337 million in fuel oil imports and $336 more natural gas imports, and our imports of foods, feeds, and beverages fell $51 million as a $89 million decrease in imports of in alcoholic beverages, $70 million less imports of feedstuffs and foodgrains, and $70 million less of food oils and oilseeds were offset by $149 greater imports of cocoa beans and $74 million more in imported meat products.... …

in other reports, the week began with a number of manufacturing surveys...on Monday, the Chicago Institute for Supply Management released the results of their survey of Midwest purchasing managers and found their overall Business Barometer decreased 3.9 points in March to 55.9, the lowest reading since last August, led by a decline in new orders, while their employment index fell from 59.3 to 50.0, indicating no growth; for the 1st quarter, the Chicago Business Barometer averaged 58.4, down from 63.3 in the 4th quarter of last year, indicating slower growth...also on Monday, the Dallas Fed reported that Texas Manufacturing Strengthened Further, as their general business activity index rose to a six-month high of 4.9 as their new orders index rose to a nine-month high of 14.7, wherein readings above zero indicated expansion...then on Tuesday, the two national Purchasing Managers' Indexes (PMIs) were released; the Institute for Supply Management (ISM) reported their PMI was at 53.7% in March, up from 53.2% in February, as its components all indicated modest growth; the employment index slipped to 51.1%, down from 52.3%, the new orders index rose to 55.1%, up from 54.5% in February,and the production index rose to 55.9%, a 7.7% jump from February's reading of 48.2%...meanwhile, the Markit US Manufacturing PMI for March (pdf) fell to from 57.1 in February to 55.5, a reading that still indicated expansion, as their output index fell from 57.8 to 57.5 and the new orders index fell from 59.6 to 58.1...on Thursday, the ISM released their Non-Manufacturing Index (NMI) for March, which came in at 53.1%, rebounding from the four year low of 51.6% in February, indicating that a modest expansion of service industries had resumed..

the hard data on manufacturing came from the February Full Report on Manufacturers’ Shipments, Inventories and Orders (pdf) from the Census bureau, more commonly referred to as just "factory orders", which reported that seasonally adjusted new orders for manufactured goods increased $7.5 billion, or 1.6% in February to $488.8 billion, while January's decrease in new orders was revised from 0.7% to 1.0%...like last week's advance report on durable goods, the increase in new orders was driven by the volatile new orders for civilian aircraft, which rose 13.4% in February, revised slightly from the 13.6% gain reported last week, although the 2.2% increase in durable goods orders overall was unrevised ...excluding the transportation sector, new factory orders rose 0.7% for the month, as new orders for non-durable goods rose 1.0% to $259.7 billion...meanwhile, factory shipments increased $4.5 billion or 0.9% to $493.5 billion, nearly recovering the pullbacks of 0.3% in December and 0.7% in January shipments, while factory inventories increased $4.1 billion or 0.7% to a new record high at $642.1 billion; inventories of transportation equipment, which were up $1.9 billion or 1.6% to $125.1 billion, led the increase...and despite the recent weakness in new orders, unfilled orders for manufactured goods rose for the 12th month of the last 13 months by 0.3% to $1,062.5 billion, also a new record high for unfilled factory orders....and in a separate report on Tuesday, light vehicle sales rose to an estimated seasonally adjusted annual rate of 16.38 million in March, a seven year high, 7.2% over February's sales and 7.3% above sales a year ago...the graph below, from Bill McBride’s coverage, shows new vehicle monthly since January of 2006; the slow climb in car sales from an annual rate below 10 million in early 2009 to the precession level currently is readily apparent…

also on Tuesday, the Census bureau reported on Construction Spending for February (pdf), a preliminary report that is often subject to revision... during February, construction spending was estimated to be at a seasonally adjusted annual rate of $945.7 billion, which would be 0.1% (±1.3%)* above the revised January estimate of $944.6 billion, and 8.7 percent (±1.6%) above construction spending estimate of last February...January's construction was revised up more than 0.1% from the originally reported $943.1 billion...both private and public spending increased by the same small fraction of a percent; private construction was at a seasonally adjusted annual rate of $680.0 billion, up 0.1% from the revised January estimate of $679.1 billion, while public construction spending was estimated at a seasonally adjusted annual rate of $265.7 billion, also 0.1% above the revised January estimate of $265.5 billion...private residential construction fell from an annual rate of 363,215 million in February to a $360,352 million rate in March, while private non-residential spending rose from a $315,843 million annual rate to a $319,626 million rate...for the year preceding this report, private residential construction rose 13.5%, private non-residential construction rose 12.5%, and public construction was down 1.0%...

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....